7 legal considerations for every startup business

Eales & Mackenzie Lawyers Melbourne

As your startup business grows, it is important to ensure that you have addressed and considered the important legal considerations that exist for each industry. Discussing these legal considerations with an experienced business lawyer will protect your business and avoid inadvertently breaking the law.

1. Choice of business structure
Choosing the right structure for your business is one of the most important decisions any new business owner will make. This choice will have a significant impact on key areas including payment of tax, control over the business and legal liability. For this reason, it is a decision that should be made in consultation with an experienced business lawyer to obtain expert advice on which legal structure will be most suitable for the specific and unique requirements of your business.

In Australia the main legal structures for businesses are:

  • Sole trader
  • Partnership
  • Trust
  • Company
  • Co operative

Many important factors are influenced by the choice of business structure. These include;

  • Control of the business
  • Cost and complexity of formation
  • Limitation of liability
  • Flexibility and future needs
  • Ongoing administration
  • Tax implications
  • Continuity of existence

2. Employer responsibilities
If you intend to hire employees it is important to familiarize yourself with key standards that exist at a state and national level in order to avoid becoming both legally and financially liable. Being aware of legal entitlements such as sick leave, annual leave and superannuation and important for every startup business to consider before commencing employment operations.

3. Intellectual property and other legal protections
Many startups are created based on a unique product, technology or service. It is therefore crucial to consider how your business wishes to legally protect themselves and their products. Depending on the nature of your service, patents, copyrights and trademarks are available to protect the intellectual property of your business. Failing to take these appropriate steps can leave you vulnerable and without legal standing should your unique ideas be stolen.

4. Partnership Agreements
If you are developing your startup with a partner or co-founder It is important to discuss and agree early on a number of important considerations.

  • The percentage of the company owned by each partner
  • Any conditions of ownership
  • Rights to buy back shares of co-founders
  • Salary entitlements

A Partnership Agreement should clearly outline the role of each individual partner, the management of company profits and terms for ending the partnership or winding up the business.

5. Shareholders Agreements
If you are setting up your company with co-founders you may need to consider a Shareholders’ Agreement. This agreement will cover important considerations such as;

  • What decisions directors and shareholders can make
  • How often directors and shareholders will meet
  • The sale of shares
  • How dividends will be paid
  • Selling the company
  • Dispute resolution
  • Deed of Accession- so that new shareholders may join

6. State and national legal obligations
Certain businesses are required to hold specific licenses or permits and may have specific laws and regulations to govern the operation of the business. Every startup business should therefore be aware of these legal obligations and consider whether they will be able to operate within the specific guidelines and regulations provided.

7. Business Terms and Conditions
Business terms and conditions act as a legal contract between you and your customers. This will clearly set out what you are providing, how you will provide or deliver it and how your customers will pay for it. Business Terms address the Australian Consumer Law requirements like refunds, repairs and returns.

Discussing these important legal considerations with an experienced business lawyer can ensure that you make informed decisions that are appropriate for your unique business and appropriate for your individual legal requirements.

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